Shopping for a better deal

PUBLISHED : Sunday, 13 December, 1998, 12:00am
UPDATED : Sunday, 13 December, 1998, 12:00am

A VERY strange spat broke out last week. Duty Free Shoppers (DFS), that leviathan of fags and booze that lurks beyond the customs barriers at the world's airports, is crying foul.

The company is spitting with fury over the move by the Airport Authority to lower rents for concessionaires by 30 per cent as part of a package designed to ease the retailers' pain.

At the root of DFS' grievance is the formula under which the concessions were awarded.

DFS, which had a monopoly on Hong Kong's duty free shopping for 36 years at the old Kai Tak, failed to win a single bid when the new airport opened - despite an offer reported to be in the region of US$1 billion.

Successful bidders pledged to pay a guaranteed monthly royalty based on sales, or estimated sales at the time of bidding - whichever is higher.

Given the dreadful slump and the pretty hopeless shopping environment at Chek Lap Kok (if you have any doubts on this, check out the new airport at Kuala Lumpur to see how it should be done), it is not hard to imagine which royalty formula the hapless bidders were required to apply.

Ahead of the bidding, the authority told bidders they would have to make forecasts on sales at their own risk. Well they did, and they were wrong. So you would think that they should suffer for their sins. Apparently not.

DFS claims the successful bidders made unrealistic bids and wants the whole process reopened to fresh tenders. It says it is unfair for the goal posts to be moved.

Unfortunately, the goal posts may have been moved, but they have been moved after the game is over, the players have packed up and the referee has taken the ball away.

There has to be some mechanism for choosing winners and losers in the bidding game. Giving concessions to the highest bidder seems pretty straightforward. If conditions change dramatically, why should the authority not make concessions? It might be noted at this point that many of the successful bidders were ventures in which property developers held stakes - and we all know there is absolutely no bias within the organs of the Hong Kong Government towards developers.

Did DFS really foresee the depth and savagery of this downturn? If that had been so obvious, surely a company with such prescience should have been warning us all about the coming fiasco many moons ago.